The Oregon Employment Department said Tuesday that tax rates employers pay for unemployment insurance will fall for the first time in three years, a spokesman said, another sign of the state's improving economy.

The average tax rate drops from 3 percent to 2.76 percent, the state said. Officials say the lower rates could save employers $85 per employee, on average, and more than $100 million overall.

The state's lowest unemployment tax rate - paid by employers with few unemployment claims - drops from 2.2 percent to 1.8 percent on the first $35,000 paid to each employee. The highest tax rate - assessed to an employer with a large number of unemployment claims - remains at 5.4 percent.

The rate for new employers that lack claims experience drops from 3.3 percent to 3.1 percent. The wages base that's taxed increases from $34,100 to $35,000. Any income above that isn't taxed.

"The reason the rates are down is because the unemployment insurance
trust fund is at a healthier level," employment department spokesman
Craig Spivey. "We've been at the highest tax level for the last three
years."

The state's unemployment trust fund aims to keep enough reserves for an 18-month recession, he said.

The lower rates also reflect an improved economy. The department said today the state's unemployment rate dropped to 7.7 percent, the lowest rate in five years, and added 8,400 jobs from August through October.

An employer's tax rate ultimately varies based on its history of former workers filing for unemployment insurance benefits.

"It's all based on an employer's experience rating based on how much
they've used the unemployment trust fund for claims," said Spivey. "The
more claims you've had the higher your tax rate, kind of like an
insurance policy. With very few claims you're at the lower end of the
scale."